Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Is the tide turning for the Stock Market?

Stock-Markets / Global Stock Markets Nov 27, 2008 - 07:35 AM GMT

By: Prieur_du_Plessis

Stock-Markets

Best Financial Markets Analysis ArticleI posed the following question a few days ago: “ Does the stock market rally have legs? ” We have now had four days in a row of a higher market, something we have not seen since June this year. This is also the S&P 500 Index's biggest four-day surge (+18.0%) since 1933.

A sharply weaker opening yesterday as a result of a barrage of gloomy economic reports was followed by a reversal on the news of former Fed Chairman Paul Volcker's appointment to a new White House Economic Recovery Advisory Board tasked to revive growth in the US. Involving the 81-year Volcker in this way is a smart move by President-elect Obama.


The table below shows the performances of various global stock markets over the past four trading days, as well as figures since the respective markets' highs and for the year to date (all in local currency terms).

The gains of the various US stock market sectors since the November 20 lows make for interesting reading, with previous laggards such as financials, consumer discretionary, energy and materials showing the defensive sectors (health care, utilities and consumer staples) a clean pair of heels.

Interestingly, according to Bloomberg , Société Générale global equity strategist James Montier said he's never been so bullish after the financial crisis dragged down prices of stocks, corporate bonds and inflation-protected government debt.

“This is a value investor's version of heaven. From a bottom-up perspective, the equity market is offering some excellent companies at truly bargain prices for those with the fortitude to shut their eyes, or at least switch off their screens and buy.

“With all of these opportunities available I have never been more bullish! Will I be early? Almost certainly yes, but if I can find assets with attractive returns and I have a long time horizon I would be mad to turn them down.”

Barton Biggs of Traxis Partners , according to the Financial Times , said: “I have no idea when the next bull market starts, but I do think we are setting up for the mother of all bear market rallies.” He motivates this viewpoint as follows:

• “Stocks around the world are very cheap.”
• “Stock markets have been obliterated and are deeply oversold.”
• “The fabric for economic healing is developing.”
• “We must be pretty close to maximum bearishness.”

On the last bullet, Investors Intelligence points out that its sentiment indicator has improved from its historical mid-October low of -32.2% (i.e. percentage bearish advisors less percentage bullish advisors) to -15.1% - still signaling low risk to accumulate shares.

Another important development regarding sentiment is the fact that the CBOE Volatility Index (VIX) is threatening to drop below its 50-day moving average for the first time in almost three months. Given the inverse relationship between the VIX and stocks, this is good news for equity bulls.

Should the bullish seasonal tendencies hold true on this occasion, possible first targets are the November 4 highs of 9,625 for the Dow and 1,006 for the S&P 500. This will also result in both indices clearing their 50-day moving averages (see my post “ Does the stock market rally have legs? ” for a summary table of the key levels).

The question remains: have we seen an important turn to the upside? According to Richard Russell ( Dow Theory Letters ) we've had ten 90% down-days since September, followed by a 90% up-day on November 24. If the tide is in the process of turning up, we should now see a series of strong sessions. I will be keeping a close eye on market breadth in particular.

Although there is as yet little evidence that we are leaving the corpse of the bear behind (especially with Q4 earnings disasters looming in January), it would appear that the nascent rally could have more steam left.

All that remains is to say a big thank you to my readers for your support and friendship and wish you a joyous Thanksgiving!

Source: VosieSales

Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.

By Dr Prieur du Plessis

Dr Prieur du Plessis is an investment professional with 25 years' experience in investment research and portfolio management.

More than 1200 of his articles on investment-related topics have been published in various regular newspaper, journal and Internet columns (including his blog, Investment Postcards from Cape Town : www.investmentpostcards.com ). He has also published a book, Financial Basics: Investment.

Prieur is chairman and principal shareholder of South African-based Plexus Asset Management , which he founded in 1995. The group conducts investment management, investment consulting, private equity and real estate activities in South Africa and other African countries.

Plexus is the South African partner of John Mauldin , Dallas-based author of the popular Thoughts from the Frontline newsletter, and also has an exclusive licensing agreement with California-based Research Affiliates for managing and distributing its enhanced Fundamental Index™ methodology in the Pan-African area.

Prieur is 53 years old and live with his wife, television producer and presenter Isabel Verwey, and two children in Cape Town , South Africa . His leisure activities include long-distance running, traveling, reading and motor-cycling.

Copyright © 2008 by Prieur du Plessis - All rights reserved.

Disclaimer: The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Do your own due diligence.

Prieur du Plessis Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in